Reader Forum: The rise of the Wi-Fi MVNO

Editor’s Note: Welcome to our weekly Reader Forum section. In an attempt to broaden our interaction with our readers we have created this forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but maintain some editorial control so as to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: dmeyer@rcrwireless.com or tford@rcrwireless.com.
Mobile virtual network operators have enjoyed mild success in the United States and in other countries. MVNOs, as they are known, do not own mobile spectrum licenses or infrastructure and typically resell service from primary mobile network operators in a particular region. They often focus on price-conscious consumers and target specific demographics in a market.
The MVNO business model is based on a separation of the underlying network from the service being provided. The trouble with this strategy is that with multiple service providers leveraging the same underlying network elements, differentiation becomes difficult.
Typically, MVNOs can buy wholesale access to network elements from the underlying mobile service provider at a discount. One of the largest operational cost elements for an MVNO is the use of the mobile access network. Yet in today’s hyper-competitive world where consumers expect to pay a little and get a lot, MVNOs, and all others in the mobile network food chain, are seeing margins being squeezed.
Another challenge MVNOs face is standing out from the crowd. Their offering is based on a common access network available to a range of service providers. The network’s same characteristics, like coverage and performance, are realized by all service providers equally. As a result, MVNOs face a tough economic road, with limited opportunity for true service differentiation.
A reason for optimism
However, there’s hope in smartphones, which have become all the rage for consumers. The ability to check e-mail or surf the Internet from any location is irresistible to people. Smartphones have become the alternative to using a laptop when at home or at the office.
As a result, analysts estimate that between 50% and 66% of mobile usage occurs indoors, particularly in the home and office.
It’s these same locations where subscribers typically have access to Wi-Fi networks. A 2010 survey by Kineto and MarketTools of smartphone owners in the United States revealed that 77% already have Wi-Fi installed in their homes.
Because of this Wi-Fi proliferation, savvy service providers are looking to Wi-Fi to become an extension of their mobile networks. The ability to leverage Wi-Fi access points as mini cell towers offers very compelling benefits:
–Cheap access network: By using subscribers’ own Wi-Fi and broadband, service providers are able to achieve Internet economics in the delivery of cellular service. Wi-Fi becomes an alternate mobile access network.
–Differentiated services: Service providers have the ability to target the subscriber’s location to the home or office Wi-Fi access point. Now it’s easy to implement a low-cost home calling offer or discounted international calling.
–Wi-Fi data offload. It goes without saying that if data is carried over Wi-Fi, it’s not billed at wholesale rates. What’s missing from most service plans is a reason for subscribers to care about offload. But with a creative service based on a Wi-Fi location (i.e. cheap calls from home), subscribers have a reason to engage Wi-Fi and, as a byproduct, data is offloaded to Wi-Fi.
–International roaming. For service providers with traveling subscribers, the Wi-Fi access network extends beyond domestic boarders. Connecting to the network over Wi-Fi from anywhere in the world can result in bypassing international roaming frees.
Just having Wi-Fi in the smartphone is not enough to turn Wi-Fi into a radio access solution. The smartphone needs to create a secure, trusted connection over the public Internet.
The 3GPP has defined a generic access network specification, which specifies how mobile voice/data services can be delivered securely over the public internet and Wi-Fi.
By taking advantage of the GAN specification, MVNOs are able to harness Wi-Fi access points around the world to become part of their global network. They can create unique service offers based on subscribers’ locations (at home, at the office or traveling internationally).
But most importantly, they can turn Wi-Fi and the Internet into a low-cost, high-performance mobile access network.